TD Raise Target INAUGURAL INVESTOR DAY SHINES BRIGHT LIGHT ON PATH TO $1BLN SALES TARGET
THE TD COWEN INSIGHT
Savaria's April 9 investor day did not disappoint and was well attended. Management provided a much more transparent picture of where SIS is now (including detailed, and never before provided, sales and margin profiles of each business segment/geography, manufacturing assets and competitive positioning), where it is going (2025+), and its plan to get there (Savaria One).
Impact: SLIGHTLY POSITIVE
Savaria today. With 15 manufacturing/distribution facilities, SIS's global footprint and vertical integration allows it to serve ~1,500 dealers in 55+ countries. It is also the only one-stop shop offering an unparalleled selection of mobility products across residential and commercial accessibility and patient care, thanks to its ongoing R&D investments and strategic M&A. All of this supports SIS's leading position in the accessibility industry.
Savaria 2025 and beyond. Management reiterated its target and confidence of reaching $1bln total sales and 20% adjusted EBITDA margin in 2025 (clarified that it is the target margin in every segment and geography), supported by Savaria One (details below and on page 6). It also sees further growth upside beyond 2025, backstopped by a number of long-term industry tailwinds (i.e., aging population, people's desire to age at home, government programs and commercial access, and structural shortage in healthcare workers).
Savaria One. Arguably one of the more anticipated parts of the presentation. Management provided a detailed bridge to their 2025 targets including anticipated costs and revenue/margin drivers. The accompanying Brampton facility tour further offered detailed examples and tangible improvements expected from the project.
Deep bench strength. Management was well-prepared. All business heads across the organization were introduced, all of whom expressed confidence and enthusiasm in their respective business and in reaching 2025 targets.
Employees are key. It was clear that management cares and has tight relationships with its employees as we witnessed on the manufacturing floor (i.e., managers were empowered to present their respective products/sections), which we believe promotes loyalty and engagement.
Conclusion. Overall, we believe the improved transparency and well-received presentation should strengthen investor confidence around the strength of the underlying business as well as the robust long-term outlook. As such, we are moving up to the upper half of our 9.0x-10.0x target multiple range. After rolling out valuation another quarter, our target increases to $23.00 (from $21.00).